TIER REIT, Inc. (NYSE: TIER) today reported results for the
quarter ended June 30, 2015.
Highlights for the Quarter Ended June
30, 2015:
- Sold five assets totaling approximately
$445.6 million;
- Acquired two development sites for
approximately $13.7 million;
- Expanded credit facility to $750
million;
- Completed approximately 857,000 square
feet of leasing, including approximately 235,000 square feet of new
and expansion leasing;
- Terminated third party property
management and administrative services; and
- Achieved Funds from Operations,
excluding certain items, of $0.34 per common share.
“In addition to the recent listing of our common stock on the
New York Stock Exchange, during the second quarter we continued to
make excellent progress on our 2015 business plan,” said Scott
Fordham, chief executive officer and president of TIER REIT. “Our
recently announced acquisitions and development projects are right
in line with the strategic objectives for the portfolio, which
include owning office properties in high growth markets by
utilizing recycled capital from dispositions of non-strategic
assets.”
Disposition Activity
In April 2015, the Company completed the sales of the Fifth
Third Center (Cleveland, Ohio) for a sales price of $52.8 million
and 1650 Arch Street and United Plaza (Philadelphia, Pennsylvania)
for an aggregate sales price of $190.8 million. Net cash proceeds
from these dispositions after debt assumption by the buyer of Fifth
Third Center totaled $196.0 million, resulting in a combined gain
on sale of $33.6 million.
In June 2015, the Company completed the sale of the Colorado
Building and 1325 G Street (Washington, D.C.) for an aggregate
sales price $202.0 million. The Company retained 10% ownership
interests in these properties, and combined net cash proceeds after
repayment of the mortgage debt on 1325 G Street totaled $80.5
million, resulting in a combined gain on sale of $17.1 million.
Acquisition Activity
In June 2015, the Company acquired a 95% interest in a land
development project in the central business district of Austin,
Texas, that can accommodate 325,000 square feet for $7.5 million,
and a 95% interest in a land development project in the Legacy Town
Center submarket of Plano (Dallas), Texas, that can accommodate
570,000 square feet for $6.2 million.
In July 2015, the Company acquired various real estate interests
in The Domain (Austin, Texas), a premier mixed-use development, for
a contract purchase price of $201.1 million and subsequently sold
parcels of land to an unrelated buyer for a price of $22.0 million.
The transaction included the acquisition of two Class A,
creative-space office buildings totaling 332,000 square feet and a
partnership interest in two additional Class A office buildings
totaling 337,000 square feet, as well as fee simple ownership of
various land parcels totaling over 24 acres (exclusive of parcels
sold) for future office development.
Financing Activity
In June 2015, the Company expanded its credit facility to $750.0
million through the issuance of a new, seven-year $275.0 million
term loan that matures in June 2022, with an initial
swapped-to-fixed interest rate of 3.67%. Proceeds of the new term
loan were used to repay mortgage debt secured by the Company’s Bank
of America Plaza and Terrace Office Park properties.
Leasing Update
During the second quarter, the Company entered into leases for
857,000 square feet with an average lease term of 7.5 years,
including 235,000 square feet of new and expansion leases. During
the second quarter the Company was successful in completing three
key leases: first, a 151,000 square foot, 5-year renewal with Xerox
at the Woodcrest Corporate Center property in Cherry Hill, NJ;
second, an 11-year renewal with Disney for 113,000 square feet at
the Buena Vista property in Burbank, CA; and lastly, a 7-year
extension and expansion with Americredit for 185,000 square feet at
the Burnett Plaza property in Fort Worth, TX.
Occupancy at the Company’s 31 operating office properties was
89.0% at June 30, 2015, compared to occupancy of 86.7% for those
properties at June 30, 2014. As of June 30, 2015, the Company had
approximately 688,000 square feet of commenced leases that were in
free rent, as well as approximately 54,000 square feet of executed
leases for currently vacant space yet to commence.
Other Events
On June 30, 2015, the Company closed on the buyout of the
property management agreement with HPT Management Services, LLC
(HPT Management) and made a payment of approximately $7.5 million.
In connection with the closing of the buyout option, the property
management agreement with HPT Management was terminated, HPT
Management irrevocably waived certain non-solicitation and non-hire
provisions, and the Company hired all of HPT Management’s property
management personnel providing services to it. Such property
management services are now performed internally.
On June 30, 2015, the Company terminated the administrative
services agreement with BHT Advisors, LLC (BHT Advisors)
terminating all administrative services provided by BHT Advisors to
it and made a termination payment of approximately $2.7 million.
BHT Advisors no longer provides services to the Company, such as
human resources, shareholder services, or information technology,
each of which is now performed internally.
On July 23, 2015, the Company listed its common stock on the
NYSE under the ticker symbol “TIER” and commenced a modified “Dutch
Auction” tender offer to purchase for cash up to $50.0 million of
its shares of common stock at a price not to exceed $21.00 nor less
than $19.00 per share.
Distributions
For the second quarter of 2015, the Company’s board of directors
authorized a distribution in the amount of $0.18 per share on its
common stock to stockholders of record as of the close of business
on June 30, 2015, which was paid on July 8, 2015.
On July 30, 2015, the Company’s board of directors authorized a
distribution for the third quarter of 2015 in the amount of $0.18
per share on its common stock to stockholders of record as of the
close of business on September 30, 2015, payable on October 8,
2015.
Financial Results
Funds from Operations (FFO) attributable to common stockholders
for the quarter ended June 30, 2015, was ($18.1) million, or
($0.36) per diluted share, as compared to $19.1 million, or $0.38
per diluted share, for the quarter ended June 30, 2014. FFO
attributable to common stockholders, excluding certain items
(acquisition expenses, costs associated with listing the Company’s
shares of common stock on the NYSE and related tender offer, loss
on early extinguishment of debt, and fees paid to terminate third
party property management and administrative services) for the
quarter ended June 30, 2015, was $17.2 million, or $0.34 per
diluted share, as compared to $19.1 million, or $0.38 per diluted
share, for the quarter ended June 30, 2014.
Net loss attributable to common stockholders was ($1.2) million,
or ($0.02) per basic and diluted share for the quarter ended June
30, 2015, as compared to a net loss attributable to common
stockholders of ($17.3) million, or ($0.35) per basic and diluted,
share for the quarter ended June 30, 2014.
2015 Outlook
The Company initiated its outlook for 2015 FFO attributable to
common stockholders at $0.58 to $0.65 per share and its outlook for
2015 FFO attributable to common stockholders, excluding certain
items, at $1.41 to $1.45 per share. This outlook reflects
management’s view of current and future market conditions,
including assumptions such as rental rates, occupancy levels,
operating and general and administrative expenses, weighted average
diluted shares outstanding, interest rates, and the pending
dispositions of the Wanamaker Building (Philadelphia, Pennsylvania)
and Fifth Third Center (Columbus, Ohio). This outlook does not
include any effects related to other potential acquisitions and
dispositions that may occur after the date of this release. Factors
that could cause actual 2015 FFO attributable to common
stockholders results to differ materially from the Company’s
current expectations are discussed below.
2015 Outlook includes the following assumptions (in
thousands, except share amounts and percentages):
Low High Same
Store Cash NOI growth, excluding lease termination fees 0.0 % 0.6 %
Same Store GAAP NOI growth, excluding lease termination fees 2.0 %
3.0 % Lease termination fees $ 2,700 $ 2,700 Straight-line rental
income, at ownership share $ 12,400 $ 12,900 Above- and
below-market rent amortization, at ownership share $ 5,400 $ 5,400
General and administrative expenses, including certain other items
$ 42,950 $ 40,900 Dispositions $ 690,000 $ 690,000 Acquisitions $
200,000 $ 200,000 Year-end occupancy 87.0 % 87.5 % Weighted average
diluted shares outstanding (in millions) 49.2 49.2 Certain
other items included in general and administrative expenses: BHT
Advisors termination fee and HPT Management buyout fee $ 11,500 $
10,450 Acquisition expenses $ 1,451 $ 1,201 Common stock listing
and related tender offer expenses $ 5,350 $ 5,100 Certain
other items not included in general and administrative expenses:
Acquisition expenses $ 399 $ 399 Loss on early extinguishment of
debt $ 22,102 $ 22,102
Supplemental Information
A copy of the Company’s second quarter 2015 supplemental
information regarding its financial results and operations for the
quarter ended June 30, 2015, is available in the “Investor
Relations” section of the Company’s website at www.tierreit.com. You may also obtain a copy by
contacting the Investor Relations department by email to
ir@tierreit.com.
Conference Call
A conference call will be held on Thursday, August 6, 2015, at
11:00 a.m. Eastern time/10:00 a.m. Central time. TIER REIT will
host the conference call to discuss matters related to the
Company’s financial results and operating performance, as well as
business highlights and outlook. In addition, the Company may
discuss business and financial developments and trends and other
matters affecting the Company, some of which may not have been
previously disclosed. A live audio webcast can be accessed through
the Company’s website at www.tierreit.com under the “Investor Relations”
section. A replay of the call will also be available on the website
for 30 days.
About TIER REIT, Inc.
TIER REIT, Inc. is a self-managed, Dallas, Texas-based real
estate investment trust focused on maximizing total return to
stockholders through the combination of stock appreciation and
income derived from a sustainable distribution. TIER REIT’s
investment strategy is to acquire, develop, and operate a portfolio
of best-in-class office properties in select U.S. markets that
consistently lead the nation in population and office-using
employment growth.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws relating to the business
and financial outlook of TIER REIT that are based on our current
expectations, estimates, forecasts and projections and are not
guarantees of future performance. These forward-looking statements
include discussion and analysis of the financial condition of us
and our subsidiaries, including our ability to rent space on
favorable terms, our ability to address debt maturities and fund
our capital requirements, our intentions to sell certain
properties, the value of our assets, our anticipated capital
expenditures, the amount and timing of any anticipated future cash
distributions to our stockholders, and other matters. Words such as
“may,” “anticipates,” “expects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” “would,” “could,” “should,” “objectives,”
“strategies,” “goals,” and variations of these words and similar
expressions are intended to identify forward-looking statements.
Actual results may differ materially from those expressed in these
forward-looking statements, and you should not place undue reliance
on any such statements. Factors that could cause actual results to
vary materially from those expressed in forward-looking statements
include changes in real estate conditions and in the capital
markets, our ability to complete the tender offer in a timely
manner or at all, the price at which shares of our common stock may
trade on the NYSE, as well as the risk factors included in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2014, and Form 10-Q for the fiscal quarter ended June 30, 2015.
Forward-looking statements in this press release speak only as of
the date on which such statements were made and, except as required
by law, we undertake no obligation to update any such statements
that may become untrue because of subsequent events.
Important Information and Where to Find
It
The information in this press release regarding the tender offer
is for informational purposes only and is neither an offer to buy
nor the solicitation of an offer to sell any securities of the
Company. The full details of the tender offer, including complete
instructions on how to tender shares, are included in the Offer to
Purchase, the Letter of Transmittal, and other related materials,
which we distributed to stockholders and filed with the SEC.
Stockholders are urged to carefully read the Offer to Purchase, the
Letter of Transmittal, and other related materials, as they contain
important information, including the terms and conditions of the
tender offer. Stockholders may obtain free copies of the Offer to
Purchase, the Letter of Transmittal, and other related materials
that we filed with the SEC on the SEC's website at www.sec.gov or by calling Georgeson Inc., the
information agent for the tender offer at (800) 457-0759 (toll
free) or by email at TIER@georgeson.com. Questions and requests for
assistance by retail stockholders may be directed to Georgeson Inc.
at (800) 457-0759 (toll free); questions and requests for
assistance by institutional stockholders may be directed to J.P.
Morgan Securities LLC at (877) 371-5947 (toll free) or Wells Fargo
Securities, LLC at (877) 450-7515 (toll free), the dealer managers
for the tender offer. In addition, stockholders may obtain free
copies of our filings with the SEC from the Company's website at
www.tierreit.com/ir.
TIER REIT, Inc.
Condensed Consolidated Balance
Sheets
(in thousands, except share and per
share amounts)
(unaudited)
June 30, December 31, 2015 2014
Assets Real estate Land $ 167,231 $ 286,430 Land held
for development 6,377 — Buildings and improvements, net 1,314,765
1,482,336
Total real estate 1,488,373
1,768,766 Cash and cash equivalents 153,158 31,442 Restricted cash
29,620 35,324 Accounts receivable, net 71,877 83,380 Prepaid
expenses and other assets 31,890 7,129 Investments in
unconsolidated entities 44,780 39,885 Deferred financing fees, net
13,292 10,783 Lease intangibles, net 76,469 94,690 Other intangible
assets, net 10,284 2,144 Assets associated with real estate held
for sale — 137,640
Total assets $ 1,919,743
$ 2,211,183
Liabilities and equity
Liabilities Notes payable $ 1,030,224 $ 1,194,085 Accounts
payable 2,192 2,790 Payables to related parties 794 2,041 Accrued
liabilities 64,794 77,375 Acquired below-market leases, net 12,773
16,984 Distributions payable 9,028 — Other liabilities 24,981
21,405 Obligations associated with real estate held for sale —
108,343
Total liabilities 1,144,786
1,423,023
Commitments and contingencies Series A
Convertible Preferred Stock 4,626 4,626
Equity Preferred
stock, $.0001 par value per share; 17,490,000 shares authorized,
none outstanding — — Convertible stock, $.0001 par value per share;
1,000 shares authorized, none outstanding — — Common stock, $.0001
par value per share; 382,499,000 shares authorized, 49,871,776 and
49,877,350 shares issued and outstanding at June 30, 2015, and
December 31, 2014, respectively (1) 5 5 Additional paid-in capital
(1) 2,645,825 2,645,927 Cumulative distributions and net loss
attributable to common stockholders (1,878,611 ) (1,862,555 )
Accumulated other comprehensive income (loss) 799 (788 )
Stockholders’ equity 768,018 782,589
Noncontrolling interests 2,313 945
Total
equity 770,331 783,534
Total liabilities and
equity $ 1,919,743 $ 2,211,183
(1) Amounts have been adjusted
retroactively to reflect a one-for-six reverse stock split effected
June 2, 2015.
TIER REIT, Inc.
Condensed Consolidated Statements of
Operations and Comprehensive Income (Loss)
(in thousands, except share and per
share amounts)
(unaudited)
Three Months Ended June 30,
June 30, 2015 2014 Rental revenue $
70,038 $ 71,234
Expenses Property operating
expenses 20,877 23,283 Interest expense 15,460 16,818 Real estate
taxes 10,198 10,276 Property management fees 2,105 2,128 Asset
impairment losses — — General and administrative 19,470 4,606
Depreciation and amortization 31,081 29,182
Total
expenses 99,191 86,293 Interest and other income
141 96 Loss on early extinguishment of debt (21,412 ) —
Loss from continuing operations before income taxes, equity in
operations of investments, and gain on sale of assets (50,424 )
(14,963 ) Benefit (provision) for income taxes (1,338 ) 59 Equity
in operations of investments 69 795
Loss from
continuing operations before gain on sale of assets (51,693 )
(14,109 )
Discontinued operations Income (loss) from
discontinued operations (121 ) (3,191 ) Gain on sale of
discontinued operations 6,077 —
Income (loss) from
discontinued operations 5,956 (3,191 ) Gain on sale of
assets 44,564 —
Net loss (1,173 ) (17,300 )
Noncontrolling interests in continuing operations 33 20
Noncontrolling interests in discontinued operations (11 ) 1
Net loss attributable to common stockholders $ (1,151 ) $
(17,279 )
Basic and diluted weighted average common shares
outstanding (1) 49,893,330 49,877,350
Basic and diluted
income (loss) per common share: (1) Continuing operations $
(0.14 ) $ (0.28 ) Discontinued operations 0.12 (0.07 )
Basic and diluted loss per common share $ (0.02 ) $ (0.35 )
Distributions declared per common share (1) $ 0.18
$ —
Net income (loss) attributable to
common stockholders: Continuing operations $ (7,096 ) $ (14,089
) Discontinued operations 5,945 (3,190 )
Net loss
attributable to common stockholders $ (1,151 ) $ (17,279 )
Comprehensive income (loss): Net loss $ (1,173 ) $ (17,300 )
Other comprehensive income: unrealized gain on interest rate
derivatives 6,146 —
Comprehensive income
(loss) 4,973 (17,300 ) Comprehensive loss attributable to
noncontrolling interests 11 21
Comprehensive
income (loss) attributable to common stockholders $ 4,984
$ (17,279 )
_________________
(1) Amounts have been adjusted
retroactively to reflect a one-for-six reverse stock split effected
June 2, 2015.
Calculation of FFO and FAD (in thousands,
except per share data) Three Months
Ended Funds from operations (FFO)
30-Jun-15 30-Jun-14 Net income
(loss) $ (1,173 ) $ (17,300 ) Net (income) loss attributable to
noncontrolling interests 22 21 Accretion of Series A Convertible
Preferred Stock — — Adjustments (1): Real estate depreciation and
amortization - consolidated 31,081 35,120 Real estate depreciation
and amortization - unconsolidated joint ventures 1,367 1,278
Impairment of depreciable real estate assets — — Gain on sale of
depreciable real estate (50,641 ) — Taxes associated with sale of
depreciable assets 1,264 — Noncontrolling interests (OP units &
vested restricted stock units) share of above adjustments 29
(53 ) FFO attributable to common stockholders $ (18,051 ) $ 19,066
FFO, excluding certain
items
FFO attributable to common stockholders $ (18,051 ) $ 19,066
Adjustments (1): Acquisition expenses 1,193 — Listing costs 2,488 —
Loss on early extinguishment of debt 21,412 — BHT Advisors
termination fee and HPT Management buyout fee 10,200 —
Noncontrolling interests (OP units & vested restricted stock
units) share of above adjustments (61 ) — FFO attributable
to common stock holders, excluding certain items $ 17,181 $
19,066
Funds available for distribution
(FAD) FFO attributable to common stock holders $ (18,051
) $ 19,066 Adjustments (1): Recurring capital expenditures (14,067
) (15,864 ) Straight-line rent adjustments (4,369 ) (1,646 ) Above-
and below-market rent amortization (1,433 ) (1,210 ) Amortization
of deferred financing fees and mark to market 898 823 Amortization
of restricted shares and units 564 311 Acquisition expenses 1,193 —
Listing costs 2,488 — Loss on early extinguishment of debt 21,412 —
BHT Advisors termination fee and HPT Management buyout fee 10,200 —
Noncontrolling interests (OP units & vested restricted stock
units) share of above adjustments (11 ) 25 Accretion of Series A
Convertible Preferred Stock — — FAD attributable to
common stockholders $ (1,176 ) $ 1,505 Weighted
average common shares outstanding - basic (2) 49,893 49,877
Weighted average common shares outstanding - diluted (2) 50,085
49,937 Diluted FFO per common share (2) (3) $ (0.36 ) $ 0.38
Diluted FFO, excluding certain items per common share (2) (3) $
0.34 $ 0.38 Diluted FAD per common share (2) (3) $ (0.02 ) $ 0.03
(1) Adjustments represent our pro rata share of consolidated
and unconsolidated amounts, including discontinued operations. (2)
All periods presented have been adjusted to reflect the one-for-six
reverse stock split that occurred on June 2, 2015. (3) There are no
dilutive securities for purposes of calculating diluted FFO per
common share and diluted FAD per common share when FFO attributable
to common stockholders or FAD attributable to common stockholders
are negative.
Calculation of Same Store GAAP NOI
and Same Store Cash NOI (in thousands)
Three Months Ended June
30, June 30, 2015 2014 Same Store Revenue:
Rental revenue $ 60,706 $ 59,102 Less: Lease termination fees (125
) (576 ) 60,581 58,526 Same Store Expenses:
Property operating expenses (less tenant improvement demolition
costs) 18,063 18,731 Real estate taxes 9,164 8,634 Property
management fees 1,891 1,788 Property Expenses 29,118
29,153 Same Store GAAP NOI 31,463 29,373 Less:
Straight-line rent revenue adjustment (2,673 ) (875 ) Amortization
of above- and below-market rents, net (1,192 ) (926 ) Same Store
Cash NOI $ 27,598 $ 27,572 Reconciliation of
net loss to Same Store GAAP NOI and Same Store Cash NOI Net loss $
(1,173 ) $ (17,300 ) Adjustments: Interest expense 15,460 16,818
Asset impairment losses — — Tenant improvement demolition costs —
245 General and administrative 18,657 4,606 Acquisition expense 813
— Depreciation and amortization 31,081 29,182 Interest and other
income (141 ) (96 ) Loss on early extinguishment of debt 21,412 —
Provision (benefit) for income taxes 1,338 (59 ) Equity in
operations of investments (69 ) (795 ) (Income) loss from
discontinued operations 121 3,191 Gain on sale of discontinued
operations (6,077 ) — Gain on sale of assets (44,564 ) — Net
operating income of non-same store properties (5,270 ) (5,843 )
Lease termination fees (125 ) (576 ) Same Store GAAP NOI 31,463
29,373 Straight-line rent revenue adjustment (2,673 ) (875 )
Amortization of above- and below-market rents, net (1,192 ) (926 )
Same Store Cash NOI $ 27,598 $ 27,572
Non-GAAP Supplemental Financial Measures
We compute our financial results in accordance with generally
accepted accounting principles (GAAP). Although Funds from
Operations, Funds Available for Distribution, Same Store GAAP NOI
and Same Store Cash NOI are non-GAAP financial measures, we believe
that these calculations are helpful to stockholders and potential
investors and are widely recognized measures of real estate
investment trust performance. We have provided a reconciliation of
the non-GAAP financial measures to the most directly comparable
GAAP measure in tables included in this press release.
Funds from Operations (FFO)
Historical cost accounting for real estate assets in accordance
with GAAP implicitly assumes that the value of real estate
diminishes predictably over time. Since real estate values have
historically risen or fallen with market conditions, many industry
investors and analysts have considered the presentation of
operating results for real estate companies that use historical
cost accounting alone to be insufficient for evaluating operating
performance. FFO is a non-GAAP financial measure that is widely
recognized as a measure of a REIT’s operating performance. We use
FFO as defined by the National Association of Real Estate
Investment Trusts (NAREIT) in the April 2002 “White Paper on
Funds From Operations” which is net income (loss), computed in
accordance with GAAP, excluding extraordinary items, as defined by
GAAP, gains (or losses) from sales of property and impairments of
depreciable real estate (including impairments of investments in
unconsolidated entities which resulted from measurable decreases in
the fair value of the depreciable real estate held by the
unconsolidated entity), plus depreciation and amortization of real
estate assets, and after related adjustments for unconsolidated
entities and noncontrolling interests. The determination of whether
impairment charges have been incurred is based partly on
anticipated operating performance and hold periods. Estimated
undiscounted cash flows from a property, derived from estimated
future net rental and lease revenues, net proceeds on the sale of
the property, and certain other ancillary cash flows are taken into
account in determining whether an impairment charge has been
incurred. While impairment charges for depreciable real estate are
excluded from net income (loss) in the calculation of FFO as
described above, impairments reflect a decline in the value of the
applicable property which we may not recover.
We believe that the use of FFO, together with the required GAAP
presentations, is helpful in understanding our operating
performance because it excludes real estate-related depreciation
and amortization, gains and losses from property dispositions,
impairments of depreciable real estate assets, and extraordinary
items, and as a result, when compared period to period, reflects
the impact on operations from trends in occupancy rates, rental
rates, operating costs, development activities, general and
administrative expenses, and interest costs, which are not
immediately apparent from net income. Factors that impact FFO
include fixed costs, yields on cash held in accounts, income from
portfolio properties and other portfolio assets, interest rates on
debt financing, and operating expenses.
We also evaluate FFO attributable to common stockholders,
excluding certain items. The items excluded relate to certain
non-operating activities or certain non-recurring activities that
create significant FFO volatility. We believe it is useful to
evaluate FFO excluding these items because it provides useful
information in analyzing comparability between reporting periods
and in assessing the sustainability of our operating
performance.
FFO and FFO, excluding certain items, should not be considered
as alternatives to net income (loss), or indications of our
liquidity, nor are they indicative of funds available to fund our
cash needs, including our ability to make distributions.
Additionally, the exclusion of impairments limits the usefulness of
FFO and FFO, excluding certain items, as historical operating
performance measures since an impairment charge indicates that
operating performance has been permanently affected. FFO and FFO,
excluding certain items, are not useful measures in evaluating net
asset value because impairments are taken into account in
determining net asset value but not in determining FFO and FFO,
excluding certain items. FFO and FFO, excluding certain items, are
non-GAAP measurements and should be reviewed in connection with
other GAAP measurements. Our FFO and FFO, excluding certain items,
attributable to common stockholders as presented may not be
comparable to amounts calculated by other REITs that do not define
FFO in accordance with the current NAREIT definition or that
interpret it differently.
Funds Available for Distribution (FAD)
FAD is a non-GAAP financial measure that we define as FFO,
excluding fair value mark to market adjustments, non-real estate
depreciation and amortization, non-cash stock-based compensation
expense, accretion of Series A preferred stock, the amortization of
financing costs, and realized gains (losses) from the early
extinguishment of derivatives, acquisition fees and expenses,
straight-line rent amounts, amortization of above- or below-market
intangible assets and liabilities, and gains or losses on early
extinguishment of debt, costs associated with our NYSE listing,
other non-recurring charges, less recurring capital expenditures,
each as adjusted for our pro rata share of consolidated and
unconsolidated amounts. Recurring capital expenditures are those
capital expenditures, tenant improvements, leasing commissions and
deferred lease incentives that are incurred to maintain current
in-place rents including the leasing costs incurred to replace
tenants upon lease expiration. Recurring capital expenditures
exclude non-recurring capital expenditures. Non-recurring capital
expenditures are those capital expenditures (1) incurred to change
the class or characterization of an asset, (2) identified as
deferred capital needs at the acquisition of a property and were
incurred within a reasonable period of time subsequent to the
property’s acquisition, or (3) incurred for tenant improvements,
leasing commissions, or deferred lease incentives within twelve
months of acquisition to lease space that was vacant at acquisition
and costs incurred to lease space that has been vacant for at least
twelve months. Although our FAD may not be comparable to that of
other REITs and real estate companies, we believe it provides a
meaningful indicator of our ability to fund our cash needs and to
make cash distributions to equity owners.
We believe that net income (loss) is the most directly
comparable GAAP financial measure to FAD. FAD does not represent
cash generated from operating activities in accordance with GAAP
and should not be considered as an alternative to net income (loss)
as an indication of our performance or to cash flows as a measure
of liquidity or our ability to make distributions.
Same Store GAAP NOI and Same Store Cash NOI
Same Store GAAP NOI is equal to rental revenue, less lease
termination fee income, property operating expenses (excluding
tenant improvement demolition costs), real estate taxes, and
property management expenses for our same store properties and is
considered a non-GAAP financial measure. Same Store Cash NOI is
equal to Same Store GAAP NOI less non-cash revenue items including
straight-line rent adjustments and the amortization of above- and
below-market rent. The same store properties include our
consolidated operating properties owned and operated for the
entirety of the current and comparable periods. We view Same Store
GAAP NOI and Same Store Cash NOI as important measures of the
operating performance of our properties because they allow us to
compare operating results of consolidated properties owned and
operated for the entirety of the current and comparable periods and
therefore eliminate variations caused by acquisitions or
dispositions during the periods under review.
Same Store GAAP NOI and Same Store Cash NOI presented by us may
not be comparable to Same Store GAAP NOI or Same Store Cash NOI
reported by other REITs that do not define Same Store GAAP NOI or
Same Store Cash NOI exactly as we do. We believe that in order to
facilitate a clear understanding of our operating results, Same
Store GAAP NOI and Same Store Cash NOI should be examined in
conjunction with net income (loss) as presented in our consolidated
financial statements and notes thereto. Same Store GAAP NOI and
Same Store Cash NOI should not be considered as alternatives to net
income (loss) as an indication of our performance or to cash flows
as a measure of liquidity or our ability to make distributions.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150805006553/en/
TIER REIT, Inc.Kelly Sargent,
972-483-2460ksargent@tierreit.com
Tier Reit Inc. (NYSE:TIER)
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